Are You a Shareholder Who Feels Disregarded? Know Your Rights and Options

Scenario 1 

You are a shareholder of a business corporation comprised of other shareholders some of which, might also hold the status of director, and you have been quite frustrated in the manner that your interests were regarded. You feel disregarded by the board of directors and the company, through, the acts and conduct of another shareholder making use of his status as director to favour his interests to your detriment. 

For example, you consider that he is appropriating himself excessive financial benefits, as if the company was his, or is acting in breach of an existing unanimous shareholder’s agreement or is acting unilaterally. 

Scenario 2 

You are the majority shareholder or director targeted by an oppression lawsuit and you consider having acted legally, in the best interest of the company and without regard to the interest of other shareholders or, that it is the complaining shareholder who did not act properly and whose conduct justified the measures adopted. 

Understanding Shareholder Oppression Remedies: What You Need to Know if You Are Considering Bringing an Oppression Action or if You See Yourself in a Position to Defend Yourself Against Such an Action

What the Court Can Do 

A possible remedy that often comes into play is shareholder oppression, which arises when one party’s actions unfairly prejudiced or unfairly disregarded the others.1 Shareholder oppression allows the court to intervene to restore fairness, and to put a stop to the oppression through the issuance of various types of orders of provisional, interlocutory, or permanent nature. For example, a court of law may on the merits of the case order one of the shareholders to sell his shares, to the company, or to the remaining shareholder(s) depending on the circumstances. The court could also destitute a director, appoint another, order an investigation of the business, affairs and finances of the company, or order access to financial information required for the clear assessment of a given situation. 

In all cases, the court will look for an equitable outcome and give serious consideration, to legitimate expectations of the shareholder exercising the judicial recourse. Effectively, the court will firstly determine the extent and legitimacy/reasonableness of the expectations of a complaining shareholder. Thereafter, it will confront them to the alleged oppression, to determine if indeed, they are disregarded. As such, legitimate expectations will at times, condition the granting of remedies and at other times, constitute a source of rights, just as those arising from law or those arising from the attributes of a certain category of shares or those arising from a unanimous shareholder’s agreement.  

Derivative Claim: When a Shareholder Must Act On Behalf of the Company Rather Than in His Own Name

Shareholders should be aware, however that some claims, such as those seeking monetary restitution or payment of excessive or improper profits or benefits, belong to the company and not to the shareholder. In such a cases, the law allows a shareholder to seek from the court authorization to act on behalf of a company that refuses to do so (generally when the faulty shareholder is in control).  

Whether you are a minority shareholder seeking to remedy the harm resulting from actions you believe are inappropriate, or a majority shareholder facing grievances or a claim brought by a shareholder or wishing to ensure that decisions taken respect everyone's rights and serve the best interests of the company, understanding your rights and available legal avenues is essential. We invite you to follow us for more information on this aspect and latest updates. 

Contact Us Today 

If you recognize yourself being in a similar situation, if you wish to contest or are already contesting an oppression remedy brought against you, or if you are wondering about the available legal remedies available, you may count on our firm’s expertise and experience to obtain answers to your questions and to represent you before the court, contact us today for a consultation. 

Client Work 

Our Senior Lead Litigator, René R. Gauthier, successfully represented clients in a matter, before the Superior Court, District of Montreal, where he secured a favorable outcome in shareholder oppression and forced buyout claims. We understand the intricacies of corporate disputes and are committed to providing strategic solutions to protect your interests. 

_________

1 Cuscuna c. Ferrarelli, 2017 QCCS 2475 (CanLII), at para 329. & Moore c. Moore, 2021 QCCS 11 (CanLII)